How DeepSeek is Empowering European Startups to Compete in the Global AI Landscape

The global artificial intelligence (AI) race has long been dominated by U.S. tech giants like OpenAI, Google, and Meta, leaving European startups struggling to keep pace. However, the emergence of DeepSeek, a Chinese AI model, is shaking up the industry and offering European tech firms a chance to catch up. With its affordable pricing, ease of integration, and competitive performance, DeepSeek is becoming a game-changer for businesses worldwide.

A Cost-Effective Alternative to OpenAI

For Hemanth Mandapati, CEO of German startup Novo AI, switching from OpenAI’s ChatGPT to DeepSeek was a no-brainer. “If you’ve built your application using OpenAI, you can easily migrate to DeepSeek. It took us minutes to switch,” Mandapati shared during an interview at the GoWest conference in Gothenburg, Sweden.

The cost savings were staggering. Mandapati revealed that DeepSeek’s pricing was five times lower than OpenAI’s, allowing his company to save significantly without compromising on performance. “I’m saving a lot of money, and users don’t see any kind of difference,” he added.

This sentiment is echoed by other early adopters, including British firm NetMind.AI. According to Seena Rejal, NetMind.AI’s Chief Commercial Officer, DeepSeek represents a “significant step forward in democratising AI” and leveling the playing field with Big Tech.

Analysts at Bernstein estimate that DeepSeek’s pricing is 20 to 40 times cheaper than OpenAI’s equivalent models. For instance, $2.5 for 1 million input tokens, or units of data processed by the AI model, while DeepSeek is currently charging $0.014 for the same number of tokens. This dramatic price difference is making AI technology more accessible to startups and smaller businesses, particularly in Europe, where funding has traditionally lagged behind the U.S.

A Wake-Up Call for the AI Industry

The rise of DeepSeek is not just about cost savings—it’s also a wake-up call for the AI industry. For years, the prevailing belief was that bigger budgets and more computing power were essential to building cutting-edge AI models. DeepSeek has challenged this notion.

In a recent paper, DeepSeek revealed that training its DeepSeek-V3 model required less than $6 million worth of computing power using Nvidia H800 chips. This is a fraction of the cost typically associated with training large language models (LLMs). Despite its lower training costs, DeepSeek has outperformed ChatGPT in some areas, even becoming the top-rated productivity app on Apple’s App Store.

“This is a wake-up call that bigger isn’t always better,” said Fabrizio Del Maffeo, CEO of Axelera AI. “By making models more attainable, the total cost of ownership and barriers to building innovative tech are lowered, which can be a catalyst for the whole industry.”

Europe’s AI Landscape: A New Hope

Europe’s tech startups have historically struggled to compete with their U.S. counterparts, primarily due to limited access to funding. According to PitchBook data, venture capitalists invested 100 billion in U.S. AI companies in 2024, compared to just 15.8 billion in Europe.

DeepSeek’s affordability and ease of integration are leveling the playing field. For Ulrik R-T, CEO of Denmark’s Empatik AI, DeepSeek is a “tremendous opportunity.” He explained, “It showed that we don’t need huge budgets to achieve our vision.”

However, not everyone is rushing to adopt DeepSeek. Larger corporations like Finland’s Nokia and Germany’s SAP are taking a more cautious approach. Alexandru Voica, Head of Corporate at British AI firm Synthesia, emphasized that “cost is just one factor.” He added, “Other factors include security certifications, frameworks, and the software ecosystem that allows companies to build and integrate with your platform.”

The Price War Heats Up

DeepSeek’s disruptive pricing is already influencing the market. In response, Microsoft recently made OpenAI’s o1 reasoning model available for free to all Copilot users, eliminating the usual $20 monthly subscription fee.

Joachim Schelde, a partner at Scale Capital, believes this trend toward affordability and transparency will continue. “AI prices are going down, so future usage is probably going where there is transparency, which is usually open source—even if it’s in China,” he said.

Challenges and Controversies

Despite its rapid rise, DeepSeek is not without controversy. Regulators in several European countries are investigating whether the company is copying OpenAI’s data or censoring answers that could portray China negatively. These concerns highlight the challenges of adopting AI models from regions with different regulatory and ethical standards.

Sanjot Malhi, a partner at venture capital firm Northzone, acknowledged the uncertainties surrounding DeepSeek’s future. “While the future of DeepSeek as a business is difficult to predict, the structural impact seems quite pervasive,” he said.

The Road Ahead

DeepSeek’s emergence is a double-edged sword. On one hand, it offers European startups a chance to compete in the global AI race by lowering costs and barriers to entry. On the other hand, it raises important questions about data security, transparency, and ethical AI practices.

For now, DeepSeek is proving to be a catalyst for innovation, pushing other AI companies to improve their models and reduce prices. As Fabrizio Del Maffeo aptly put it, “This is a wake-up call for the industry.”

For European tech firms, DeepSeek represents a golden opportunity to catch up—but only if they can navigate the challenges and seize the moment.

FAQs based on the article about DeepSeek’s impact on European AI startups.

Q: What makes DeepSeek particularly attractive to European startups? A: DeepSeek offers AI technology at a significantly lower cost – about 20-40 times cheaper than OpenAI’s models. For instance, while OpenAI charges $2.5 per million input tokens, DeepSeek charges just $0.014, making AI technology more accessible to European startups with limited funding.

Q: How easy is it for companies to switch to DeepSeek from other AI models? A: According to Hemanth Mandapati of Novo AI, switching from OpenAI to DeepSeek is remarkantly simple – taking “minutes” to complete. The compatibility with existing OpenAI-based applications makes the transition particularly smooth.

Q: What are the potential concerns about DeepSeek? A: Regulators have raised two main concerns about DeepSeek: whether it’s copying OpenAI data and whether it censors answers that could portray China in a negative light. The company is currently under investigation in several European countries.

Q: How does DeepSeek’s training cost compare to other AI models? A: DeepSeek claims its DeepSeek-V3 model required less than $6 million worth of computing power from Nvidia H800 chips for training. While some analysts question these figures, there’s general agreement that its training costs are lower than comparable American models.

Q: What impact is DeepSeek having on the broader AI market? A: DeepSeek’s entry appears to be triggering a price war in the AI industry. For example, Microsoft recently made OpenAI’s o1 reasoning model free to all Copilot users, departing from its usual $20 monthly subscription fee. This competition could lead to more affordable AI solutions industry-wide.

Q: Are all companies eager to switch to DeepSeek? A: No, larger companies like Nokia and SAP are more cautious about switching. As noted by Synthesia’s Alexandru Voica, cost is just one factor – companies also consider security certifications, frameworks, and software ecosystem integration capabilities when choosing AI platforms.